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 Author Topic: Bitcoin ownership obeys a power law - BTC price prediction thru to July 2013  (Read 2290 times)
jim618
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 July 02, 2011, 03:00:05 PM

Hello Everybody,

I noticed today that the current distribution of bitcoins obeys a power law (http://en.wikipedia.org/wiki/Power_law).
If you draw it on a log-log graph then you get a nice straight line.

With a bit of whimsy, I have extrapolated what this graph will look like in a year from now (July 2012) and in two years time (July 2013) to predict the future price of bitcoins !

Here is the distribution of bitcoin I use initially:

1 x Satoshi owns 2,000,000 BTC
10 x "2010 Early geeks" own 200,000 BTC each
100 x "2010 Late geeks" own 20,000 BTC each
1000 x "2011 Q1 Early adopters" own 200 BTC each
10,000 x "2011 Q2 Early adopters" own 20 BTC each
100,000 x "2011 July Dabblers" own 3 BTC each

This distribution roughly matches the price and numbers available of BTC since its creation - it is an educated guess really

Here is what the current distribution looks like:
http://jdigi.net/powerLaw/bitcoin%202011%20July.png
(2011 July  |  bitcoin at USD 20 = 1 BTC  |  100,000 bitcoin users)

If you extrapolate the straight line for a year you get this graph:
http://jdigi.net/powerLaw/bitcoin%202012%20July.png
(2012 July  |  bitcoin at USD 100 = 1 BTC  |  600,000 bitcoin users)

And then push it out another year you get this:
http://jdigi.net/powerLaw/bitcoin%202013%20July.png
(2013 July  |  bitcoin at USD 1000 = 1 BTC  |  5,600,000 bitcoin users)

I have put the Open Office spreadsheet I used to make these graphs at:
http://jdigi.net/powerLaw/bitcoin%20power%20law.ods
if you want to have a play.

:-)

Jim

p.s. Do you own due diligence, this is not financial advice, etc, etc

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jim618
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 July 02, 2011, 05:40:09 PM

Using the same model, you can work out how many bitcoin millionaires there are now, and will be in July 2012 and July 2013.

It is one of those 'area under the curves' problems but it is easier if I show you:
Here is the number of people with one million USD or more in bitcoin as of now:

http://jdigi.net/powerLaw/bitcoin%20millionaires%202011%20July.png
(July 2011  |  50 USD millionaires)

Here is the same graph for the July 2012 projection:
http://jdigi.net/powerLaw/bitcoin%20millionaires%202012%20July.png
(July 2012  |  120 USD millionaires)

And here is what it looks like in July 2013:
http://jdigi.net/powerLaw/bitcoin%20millionaires%202013%20July.png
(July 2013  |  500 USD millionaires)

In the last graph, notice that Satoshi has become the first bitcoin USD billionaire.
Congratulations Satoshi Nakamoto !

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drakahn
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 July 08, 2012, 07:21:29 PM

Hello Everybody,

I noticed today that the current distribution of bitcoins obeys a power law (http://en.wikipedia.org/wiki/Power_law).
If you draw it on a log-log graph then you get a nice straight line.

With a bit of whimsy, I have extrapolated what this graph will look like in a year from now (July 2012) and in two years time (July 2013) to predict the future price of bitcoins !

Here is the distribution of bitcoin I use initially:

1 x Satoshi owns 2,000,000 BTC
10 x "2010 Early geeks" own 200,000 BTC each
100 x "2010 Late geeks" own 20,000 BTC each
1000 x "2011 Q1 Early adopters" own 200 BTC each
10,000 x "2011 Q2 Early adopters" own 20 BTC each
100,000 x "2011 July Dabblers" own 3 BTC each

This distribution roughly matches the price and numbers available of BTC since its creation - it is an educated guess really

Here is what the current distribution looks like:
http://jdigi.net/powerLaw/bitcoin%202011%20July.png
(2011 July  |  bitcoin at USD 20 = 1 BTC  |  100,000 bitcoin users)

If you extrapolate the straight line for a year you get this graph:
http://jdigi.net/powerLaw/bitcoin%202012%20July.png
(2012 July  |  bitcoin at USD 100 = 1 BTC  |  600,000 bitcoin users)

And then push it out another year you get this:
http://jdigi.net/powerLaw/bitcoin%202013%20July.png
(2013 July  |  bitcoin at USD 1000 = 1 BTC  |  5,600,000 bitcoin users)

I have put the Open Office spreadsheet I used to make these graphs at:
http://jdigi.net/powerLaw/bitcoin%20power%20law.ods
if you want to have a play.

:-)

Jim

p.s. Do you own due diligence, this is not financial advice, etc, etc

That'd be nice

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cst
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The Cosmos doesn't care about you.

 July 08, 2012, 09:15:32 PM

Probably because the OP is 1 year old... Too bad he was wrong on the price
Gliss
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 July 08, 2012, 10:48:14 PM

Hey now, there's still a couple weeks left for his July 2012 prediction.

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DannyHamilton
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 July 09, 2012, 02:58:05 AM

. . .If you extrapolate the straight line for a year you get this graph. . .
. . .Too bad he was wrong on the price. . .

Yes, when making financial decisions, it is important to always remember that "Past performance is no guarantee of future results."

jim618
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 July 09, 2012, 09:53:28 PM

I have put the links back (I was using that domain for something else).

Yes - a pity that prediction did not quite work out !!

:-)

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Raize
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 July 10, 2012, 05:02:58 AM

Quote
1 x Satoshi owns 2,000,000 BTC
10 x "2010 Early geeks" own 200,000 BTC each
100 x "2010 Late geeks" own 20,000 BTC each
1000 x "2011 Q1 Early adopters" own 200 BTC each
10,000 x "2011 Q2 Early adopters" own 20 BTC each
100,000 x "2011 July Dabblers" own 3 BTC each

I don't think any one person owns more than 1 million BTC, including Satoshi. I could be wrong on this, of course, but given that we saw it hit \$30 and then saw ~200,000 Bitcoins enter the market, I have to guess the most anyone owns is actually more around 200,000 Bitcoins (obviously there is a wallet with 400,000+, but I would disagree that *one* person owns that amount).

Specifically I would take issue with this one:
Quote
1000 x "2011 Q1 Early adopters" own 200 BTC each

That's exactly when I got involved, and I own significantly more than 200 BTC. So too do most of the first 1,000 early adopters you describe. I think there are still a handful of people that, if they chose to do so, could drive the price to \$5 if they wanted to sell on MtGox right now. I do think the number of people that can do that (owning 100,000 BTC or more) is under 10, including groups/entities, but it's something to think about or consider when purchasing.

I also think you maybe overestimate the numbers on your latter two categories. But that's just my guess. This is still a pretty reasonable approach to take when doing estimates, though, I just think you've got the scale off a little bit.

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FreeMoney
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Strength in numbers

 July 10, 2012, 05:48:30 AM

I think you missed the 2000BTC crowd.

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